GAO: Executive Branch Wastes Hundreds of Millions on Software

According to a report from the bipartisan Government Accountability Office (GAO), the Office of Management and Budget (OMB) and 21 other agencies of the federal government’s Executive Branch “do not have adequate policies for managing software licenses.”

Despite the federal government’s $82 billion of annual IT investments, including software licenses, OMB does not guide agencies in developing comprehensive license management policies. One of the two agencies that independently developed a policy with clear accountability and oversight on enterprise software license agreements is saving $181 million a year. The GAO believes that hundreds of millions of dollars more could be saved if OMB would give direction and the agencies would take responsibility for controlling wasted costs.

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The United States federal government is the largest buyer of information technology hardware and software in the world. These systems have increasingly automated many of the manual functions formerly performed by federal workers. But the GAO found that OMB, which is supposed to provide strict management rules and regulations for all government purchases, either lacked the technical capability and/or failed the focus on controlling the federal government’s purchase of enterprise software licenses.

The GAO said in a letter to Senator Tom Carper (D-DE), the head of the Senate Committee on Homeland Security & Governmental Affairs, “Federal agencies are not adequately managing their software licenses because they generally do not follow leading practices in this area.”

The GAO identified five best practices that major companies in the private sector follow to monitor their software contracts: centralized management, established software license inventory, tracking and maintaining inventory, analyzing software license data, and providing sufficient training. The GAO’s investigation found that none of the agencies had implemented all of the standards, and that few had fully implemented even one of them. Of the 24 agencies, not one had fully implemented the tracking, analysis, or management practices recommended by GAO.

The GA report targeted the performance of the Office of Management and Budget, which is in charge of overseeing managing all the agencies and departments that fall under the president’s executive authority. In an interview with GAO investigators, one official from OMB’s Office of E-Government and Information Technology said the agency has “no plans to develop such guidance at this time.”

The GAO letter to Senator Carper concluded, “Until the agencies have sufficient direction from OMB, opportunities to systematically identify software license related cost savings across the federal government will likely continue to be missed.”

As the former CEO of two NYSE listed companies, it is commonly assumed in private sector senior management circles that about 25% of IT budgets are wasted. The challenge is that very few corporate managers have the expertise or are willing to commit the time to discover what part of the 25% is being wasted.

The wasted percentage of spending in the federal government could be much higher because OMB has never put out the necessary guidance for the agencies to follow. When questioned by The Fiscal Times about the GAO report and its allegations of OMB lack of accountability, “OMB officials challenged the GAO’s finding, claiming that additional guidance is unnecessary.”